Australia’s mortgage cliff still towers over property market

The Australian Prudential Regulatory Authority (APRA) has updated its statistics on Australian loan repayment deferrals, which reveals that there were still $229 billion loans outstanding as at 31 August, accounting for 8.5% of total loans outstanding by value:

Of these, $160 billion of deferred loans were mortgages, accounting for 9.0% of total mortgages outstanding.

In number terms, 393,467 mortgages were deferred as at 31 August, accounting for 7% of total mortgage facilities.

In early September, Australian Bankers Association (ABA) CEO, Anna Bligh, announced that banks would commence “the largest ever customer contact process in the industry‚Äôs history” as it seeks to contact around 400,000 customers that have deferred repayments.

It appears from this data that banks are having difficulty getting customers to recommence payments given the value of mortgages deferred only declined by $7 billion between July and August, from $167 billion to $160 billion. In a similar vein, the number mortgage deferred only declined by around 21,000, from 414,430 in July to 393,467 in August.

In fact, the share of mortgages deferred was roughly the same as at 31 August (9.0%) as it was when the pandemic began in April (also 9.0%):

The Australian Prudential Regulatory Authority has permitted banks to extend mortgage repayment relief until March 2021. But banks are still required to ascertain from borrowers whether they are in a financial position to commence repayments.

Thus, large numbers of deferred mortgages could hang over the housing market and economy for another six months.

This creates a potential ‘perfect storm’. In addition to the expiry of mortgage repayment holidays, emergency income support (JobKeeper and the JobSeeker supplement), early access to superannuation, and the moratorium on personal insolvencies and bankruptcies are all scheduled to end. Although, these too could be extended.

Unconventional Economist
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  1. happy valleyMEMBER

    “Thus, large numbers of deferred mortgages could hang over the housing market and economy for another six months.”

    Nah – Josh Rainbowberg being the banking innovator that he is with his new-world totally irresponsible lending policy, will likely announce that loans now never have to be serviced but that depositors are to get no, or negative, interest on their deposits and cannot withdraw them.

    • I have some questions over both your comment above ‘their deposits and cannot withdraw them’ and the ‘bail in’ concept.
      If either/both of these were to occur, how does the average person actually live, given that you no longer get paid in cash, but via DD, if your deposits are essentially untouchable, how do you pay your bills and feed yourself????
      I can just imagine people en masse going the govt and saying, ‘I am working, I am earning money, but your banks won’t give me access to my money so I can’t live’!!! This is definitely fodder for ‘the peasants are revolting’!!!

  2. Anyone who needs an extension till next year is in deep shyte, let’s face it. May as well bite the bull3t and sell up.

  3. Jumping jack flash

    Once the flow of immigrants resumes everything will be ok.

    The narrative is making sense:

    The proposal for “advanced manufacturing”.
    Highly subsidised in the name of COVID, so nobody can shout it down as they did with the car industry, and to be able to pay the level of wages that are required for acquiring debt [while keeping final price of manufactured goods down].

    “Analysis” will yield a dire shortage of skills for “advanced manufacturing”, conveniently requiring increased skilled migration targets. This is rushed through and nobody argues against it because, “advanced manufacturing”, come on! Plus COVID. (How lucky it is that the virus came along exactly when it did?)

    New immigrants flood in, snap up the wage-subsidised jobs in the new “advanced manufacturing” sector and commence taking on debt to bail out the poor unfortunates, and pay them out their equity and capital gains.

    Relaxed lending standards allow the newly arrived, debt-free people to be eligible to take on larger piles of debt than ever before experienced by a Quiet Australian in this fine country.

    The ponzi grows up a level. Until the next time it stops.

    Guys, Joshy and the fearless leaders have our back.
    Don’t worry.